News Investment

News Investment

By the Project for Excellence in Journalism

As media platforms proliferate and evolve, cable news networks are faced with growing pressures to stay relevant, and have to go beyond just producing TV journalism. Not only must they improve their existing content, but like other media they must increasingly compete with other kinds of journalism, online, on mobile devices, with text, audio and more. Cable’s great historic advantage, immediacy, is no longer the province of cable alone.

Against that background, these developments stood out in 2006:

Fox News appears to be continuing to increase investment in its news operation at a higher rate than its competitors.

CNN, along with its sister channel, CNN Headline News, after scaling back earlier in the decade, is increasing its investment, too, but more slowly.1

MSNBC, which has been cutting back on its operations for the previous two years, was projected to see expenses grow in 2006, but that was before the announcement by GE of its new NBC 2.0 program, which is tallying up major cutbacks throughout the news division.

It is less clear how much of each channel’s investment is going into reporters and producers — newsgathering boots on the ground — and how much is going elsewhere.

The trend toward opinion journalism, one of the elements of Fox News’s success, appears to be strengthening among its rivals. CNN, CNN Headline News and MSNBC all invested more heavily in promoting opinionated personalities.

Investing Back and Preparing for the Future

There are two ways of analyzing a station’s financial investment in the news product. The first is to look at all the money a company spends to operate a station. That amount, total expenses, includes salaries and capital expenditures on technology and machinery, as well as the specific costs attributed to different programs.

The second way of looking at expenses is to identify the part attributable to specific programs, termed programming expenses. That includes the costs of either buying material from others or producing it in-house. This second category deserves a closer look.

Programming Expenses

Projections for 2006 indicate that the three main news channels will have spent up to two-thirds of their overall expenses on news programming. At MSNBC, programming was expected to make up 74% of all expenses. Fox News’s share was 63%, while CNN was expected to invest about 54% of its expenses in programming. The numbers represent a slight growth for MSNBC and Fox News from the previous year and a decline for CNN.2

While CNN devotes the smallest percent of its total expenses to the newsroom, it is still at the top when it comes to sheer dollars. Its projected newsroom spending for 2006 was $346 million, up from $330 million in 2005 (a 5.7% increase). One reason the number is higher is it reflects both CNN and CNN Headline News.

Fox News was expected to spend roughly $75 million less than CNN in 2006 ($271 million in programming expenses), but that represented almost a 23% rise from $221 million in 2005, the biggest percentage growth among all the three competitors.

MSNBC, meanwhile, was projected to spend by far the least, $153 million in 2006, a 10% rise from the previous year ($139 million).

Those projections, however, were released by Kagan Research before the changes in ownership and restructuring at NBC Television (see Ownership). Actual figures might not reflect the optimistic projections. If media reports are to be believed, the shakeups in NBC News, CNBC and MSNBC newsgathering resources are bound to mean some cutbacks in programming costs.

When other expenses are added in (such as salaries and capital expenditures on equipment and facilities), Fox News is expected to increase expenses nearly 17% (compared with the 23% increase in revenues). That is about the same growth in expenses the channel saw in 2005 (16%). In dollar terms, Fox News is expected to spend $428 million in 2006, up from $367 million in 2005.

CNN’s total expenses were projected to increase almost 5%, to $675 million, up from $643 million the year before, on revenue growth of 8%. That means CNN will spend about 69% of its revenues to cover expenses, as opposed to 70% in 2005. The share it puts back is more than Fox News but much less than MSNBC.

MSNBC, meanwhile, seemed to be cutting costs in 2006. If the projections are correct, MSNBC would have cut expenses by 14% during the year on revenue growth of 7%. MSNBC has been cutting costs for the last three years, according to the data, but these cutbacks are significantly higher. The channel had cutbacks of 3% in 2005 and 5% in 2004.

Given its lower base, expenses eat up a considerably higher percentage of MSNBC’s revenue. In 2006, MSNBC was expected to have spent a total of $205 million, about three-fourths (76%) of its total revenue.3

Cable News Expenses
2005 vs. 2006, in $ millions

2005 Projected

2005 actual
(projection vs. actual)

2006 projected

CNN

574.3

643 (+68.7)

675.2

Fox News

366.6

366.6 (0)

428

MSNBC

234.6

238.8 (+4.2)

205.2

Source: Kagan Research, LLC, a division of JupiterKagan Inc.

How do those expenses play out on the ground in terms of newsroom sizes and operations? Are those elements growing, or is the money going into promotion, salaries for hosts, sets, and show costs? That is harder to know, and increasingly the news channels are not saying.

CNN is clearly the largest operation, with 11 domestic bureaus and 26 international ones. Those numbers reflect no change from a year earlier. But finding much more than that, for the moment, is difficult. The network did not provide its staffing numbers, but for the latest year for which we have data, 2004, it had roughly 4,000 employees (see our 2005 Annual Report).

Fox News appears to be building. The channel ended 2006 with 10 bureaus in the U.S. and 6 abroad, according to the Los Angeles Times reporter Matea Gold.4 The number overseas doubled from the three it had at the end of 2005, in London, Paris and Jerusalem. Channel executives were also reported to be planning to build their international coverage by partnering with other international news organizations or broadening their pool of freelancers.5 But getting a full scope of Fox’s investment is also difficult. Like CNN, the channel did not offer staffing numbers, but for the latest year for which we have estimates, 2004, it had 1,250 employees in its news operation.

At MSNBC, the trend lines are probably not promising. With its parent company cutting back, and the network still struggling to build audience, it had begun cutting costs at least two years earlier. MSNBC relies on NBC News’ bureaus domestically and worldwide. Those include 15 international bureaus and seven bureaus in the U.S. As of December 2006, it had a staff of 600 dedicated to the cable operation, according to its PR department.6 But the news channel can also turn to NBC personnel for content.

Changes on the Air and Behind the Scenes

The declines in viewership, slowdown in growth of profits and growing competition from new media all represent challenges for cable news. One way the industry appears to be responding is by changing programming line-ups. All three channels fiddled with their programs and on-air faces in 2006. The impact of these changes, though, remains to be seen.

CNN

In the search for a successful programming strategy to counter Fox News, CNN made numerous changes in 2006.

Those began first thing in the morning, a time slot where CNN lags behind both Fox News and the broadcast network morning shows. CNN’s American Morning became an hour shorter starting in 2007 (6 a.m. to 9 a.m.) just a year after it had been expanded to four hours. That makes it the same length as Fox News’s more popular “Fox & Friends.” Trade magazines speculated that CNN may also hope to attract morning network TV viewers in the wake of all the changes in the broadcast morning shows with the departure of Charles Gibson and Katie Couric to evening news (see Network TV Audience).

In daytime — between 9 a.m. and 4 p.m. — CNN merged its two programs, CNN Live Today and Live From, into one long news block called CNN Newsroom. CNN’s longtime anchor, Daryn Kagan, left the channel in September 2006. She was replaced by a new hire, Don Lemon, who began by hosting the afternoon leg of the show along with Kagan’s former co-anchor Kyra Phillips, who remains. Lemon had been a local TV anchor in Chicago.

In prime time, CNN continued to promote its two tent poles, the star anchor Anderson Cooper’s Anderson Cooper 360, which starts at 10 p.m., and Wolf Blitzer’s The Situation Room, which runs from 4 p.m. to 8 p.m. Another prominent personality getting increasing attention is CNN’s Lou Dobbs, who hosts his one hour show at 6 p.m. as a break in Blitzer’s show. The rest of prime time is taken up by Paula Zahn Now (8 p.m.) and Larry King Live (9 p.m.)

Dobbs saw some notable ratings success in 2006 (see Audience). The surge came after Dobbs recast himself from a traditional financial journalist into an economic populist crusading on such issues as exportation of jobs and the decline of the middle class. The transformation has made Dobbs more an advocacy and opinion journalist in the mold of Fox News’s Bill O’Reilly and MSNBC’s Keith Olbermann. And just as their shows have been the only ones seeing growth when cable news over all is slowing down, Dobbs’ numbers are also on the rise.

Dobbs, who has been with CNN since its inception (save for an interlude from 1999 to 2001) was an utterly conventional financial reporter who did features on different companies and interviews with corporate chieftains. His new show airs at 6 p.m. ET and begins CNN’s evening programming. The hour-long show is spilt in two: The first half hour contains domestic and international news, while the second is dominated by “brands” or special segments on his pet issues. These segments, with names like “Broken Borders” or “Exporting America,” are heavily promoted across CNN.7

CNN Headline News

One of the biggest questions facing the CNN news channels — CNN U.S. and CNN Headline News — is how they can compete with the more opinion-filled prime-time competition and still hold on to their reputation as objective news sources.

For CNN, one strategy has been to make Headline News a more personality-driven talk and opinion TV channel in prime time. Originally designed as a 24 hour “wheel” format, where headlines were simply repeated every half hour, the channel continued its efforts to create a more distinct identity for itself in 2006.

Ken Jautz, who is responsible for Headline News, told the New York Times that the channel was analogous to the op-ed page, with the main CNN providing the rest of the more objective news pages.

That, at least in prime time, represents a remarkable transformation for Headline News. The name itself in the evening is a holdover from another time, if not something of a misnomer. It is also, as noted in the Audience section, a sign of how headlines, or news on demand, is no longer a franchise cable commands alone.

The shift “from news to views” saw Headline News investing in some changes to its lineup and promoting a host of strong personalities. Chief among the channel’s star names are the prime-time talk-show hosts Glenn Beck and Nancy Grace, both controversial.8

Beck, a conservative talk-radio host, joined Headline News in May 2006 with his own prime-time show (Glenn Beck at 7 p.m. ET). Asserting that he is no journalist, Beck tends to takes radical points of view and claims to say “what others are feeling but afraid to say.”9

Equally brash, if not more so, is the other Headline News star, Nancy Grace. The former lawyer, who began the Nancy Grace legal talk-show in 2005, is known for her personal and emotional involvement in the cases she airs. In 2006, Grace’s aggressiveness became even more controversial when one of her guests, Melinda Duckett, committed suicide after Grace treated her as a potential suspect in the Ducketts’ son’s disappearance. In November 2006, the woman’s family sued Grace.10

But prime time is not the only slot on which CNN Headline News executives are concentrating. Noticing the attention that the morning anchor Robin Meade was getting, they re-branded the program around her — calling it Robin & Company — in October 2005, making it more conversational and less straight news. One year later, the strategy seemed to have paid off with higher ratings and positive audience feedback.

As for its lineup changes, it eliminated its 4 p.m. to 6 p.m. newscast, citing a need to “bolster their editorial services elsewhere.” To fill the gap, the earlier newscasts were increased by an hour each. In prime time, it extended its star weeknight shows to the weekends. Those include Prime News with Erica Hill, Showbiz Tonight and Nancy Grace.

MSNBC

The fate of MSNBC was the subject of much speculation throughout 2006. In October, NBC Television announced a major new initiative that implied that the channel would have to shift its current headquarters and combine its newsgathering resources with that of the sister concerns NBC News and CNBC. The changes to its staff weren’t clear yet, but the cuts at the NBC News division were an ominous sign for the newsgathering resources at MSNBC, which had already been cutting expenses for three years, (See Ownership and Network TV.)

Even before the NBC restructuring was announced in October 2006, MSNBC was making a significant number of programming changes.

In July 2006, soon after the resignation of its president and GM, Rick Kaplan, it cancelled the legal show he had approved, Rita Cosby: Live and Direct (only a few months after giving it a prime-time slot). MSNBC also saw the end of two other shows that Kaplan had approved, Connected Coast to Coast and Weekends with Maury and Connie. The latter was hosted by the NBC talk-show veteran Maury Povich and his wife, the former news anchor Connie Chung. Kaplan’s only remaining creation is the Tucker Carlson Show, which was re-branded Tucker and re-scheduled to an late afternoon slot, but it has been a ratings disappointment. According to Nielsen data, Carlson’s show saw a 19% drop in viewers in November 2006 compared to November 2005.

The star personalities on MSNBC instead have turned out to be Chris Matthews and Keith Olbermann.

Reminiscent of Fox News’ opinion-laden prime time fare, Olbermann’s opinionated, increasingly anti-administration 8 p.m. talk show, Countdown with Keith Olbermann, has become a surprise ratings success in recent months (see Audience). Indeed, in February 2007, MSNBC renewed his contract for four more years.11

Before he became a news talker, Olbermann was a sports broadcaster, notably with ESPN. His sharp commentary and writing as a co-anchor of SportsCenter became a trademark for the channel, and he continues to appear on ESPN Radio.12 He joined MSNBC in 1997 to host The Big Show, which became The White House in Crisis during the Clinton-Lewinsky scandal in 1998, but quit a year later. He rejoined the channel in March 2003 with the current show. Launched to cover the Iraq War, it was originally called Countdown: Iraq, but is now a mix of the top headlines (“counted down” to reach a big story last, though in reality the top stories of the day come first) accompanied by his comments and a number of quick recurring segments such as “Oddball” or “Top 3 Newsmakers.”

The show has been gaining viewers since August 2003, even though it competes at that hour with Fox News’s The O’Reilly Factor, the most-watched cable news show. Indeed, one of the factors for Olbermann’s success has been his on-air feud with O’Reilly. Openly critical of the Fox News host, Olbermann has frequently named him “the worst person in the world” (one the recurring segments of his show) that has consequently made Olbermann “a hero to liberals and anathema to conservatives.”13 More notably, it has led to both media coverage and higher ratings.

Olbermann is one of a growing number of cable news personalities bringing their opinions to news channels and succeeding. After years of ratings troubles, MSNBC couldn’t be happier. According to Dan Abrams, “Keith Olbermann is the right person at the right time, and doing it the right way.”14

Fox News

One core of Fox News’ success, and one CNN and MSNBC are beginning to emulate, is that it has created distinct programs, usually built around opinionated personalities. And furthermore, it has managed to do that at different points in the day.

That success begins in the morning. From 6 a.m. to 9 a.m. ET, the channel airs Fox & Friends, the highest-rated cable morning show. According to some trade magazines, the program is even poised to take on the network broadcast shows.15 Built as a talk show with three hosts, the show’s casual and conversational approach is peppered with hard-news updates, personal opinion and ideological edge. The show saw no changes in format, though one of its anchors, E.D. Hill, was replaced by Gretchen Carlson in September 2006.

In February 2007, the channel re-branded its 9 a.m. to 11 a.m. block American Newsroom, hosted by Bill Hemmer and Megyn Kelly. During the earlier programming changes in September 2006, Hemmer was made the anchor of a one-hour show at noon that used the Fox News Web site as a hook. “Fox Online” was a recap of the day’s top news and picked up stories that are most popular on the Web site for discussion. The time slot is now taken up by its predecessor, Fox News Live, which was extended by an hour; it now runs from 11 a.m. to 1 p.m. and is anchored by E. D. Hill.

September was also when the anchor Martha MacCallum was promoted to be a host of her own show, The Live Desk with Martha MacCallum, from 1 p.m. to 2 p.m. The channel named Jane Skinner anchor of the weekday show Fox News Live, from 2 p.m. to 3 p.m., to replace MacCallum.

Another prominent change was the elimination of its Dayside program in September. The show’s anchors, Mike Jerrick and Juliet Huddy, headed to a network morning program for Fox’s broadcast stations (see Local TV Audience).16

The Fox Business Channel

The biggest question about Fox News in 2007 is its business channel, though its existence is now more a question of when, not if.

In February 2007, Murdoch announced that the Fox Business Channel would launch by the fourth quarter of the year.

Getting enough subscribers for the new channel to make financial sense was one of the biggest obstacles to its launch. It managed to reach its goal of 30 million subscribers by the end of 2006, after securing “carriage” or becoming a part of the channel line-up on the Comcast, Time Warner and Charter cable systems and on the DirecTV satellite network.17

The first big sign of News Corp.’s investment in the new venture was its inclusion in Fox News’s license-fee contract renegotiations in October 2006 (see Economics). While there was no official statement, trade reports early in the year said that Fox would ask for about 10 cents per subscriber per month for the business channel.18 Eventually, however, Fox executives clarified that the business channel was not a factor in determining the rates for Fox News.

News Corp. has already invested in some staff for the business channel. According to Television Week, Neil Cavuto will oversee content and business news coverage.19 Day-to-day operations will be handled by Kevin Magee, a former Fox radio syndication chief who is also in charge of the new syndicated morning TV show on the broadcast network. He was named executive vice president of the business channel in October 2006.

Joining them will be former CNBC correspondent Alexis Glick, who was made director of business news in September 2006. She is also expected to anchor on-air.

New York , New York

One other change in cable newsrooms was a greater push toward New York City, the traditional home of national television news. All three networks created a higher presence there in 2006. CNN beefed up its studio, Fox News bought marketing space on Times Square and MSNBC moved in with NBC News.

CNN, headquartered in Georgia, invested in a large studio at the Time Warner Center (its New York headquarters). The new studio is technologically advanced, and its centerpiece is a giant video wall displaying both video and graphics that first showed up during the broadcast of Anderson Cooper 360 in October 2006. It was promoted as a big-screen showcase for the latest video and informational graphics pouring into CNN from around the nation, the world and the Web, and was used heavily during the election coverage in November 2006.

All MSNBC operations are expected to be out of New Jersey sometime in 2007 as it begins sharing space with NBC News at its Rockefeller Center headquarters in Manhattan.

Most of Fox News’s programs are aired from its New York headquarters (also the site for a massive 10th anniversary party in October 2006). The Fox Television group built on its presence in the city by signing a 10-year deal to air its programming on Times Square. The 1,400-square-foot television screen is an iconic marketing space, and the Fox group intends to use it to air Fox News content morning and evening, along with local news from the New York Fox station and sports programming. Its new business channel is also expected to be based in Manhattan.